Their goal was revenue improvement and not just occupancy improvement.
In an earlier article titled “Holiday Retirement Says Yes to Big Data For Pricing” was based on a conversation I had with Sheila Donahoe the CIO and Shamim Wu the executive VP of sales for Holiday Retirement on their transition from a fairly primitive process of price setting to using Senior Housing Forum Partner Prorize to determine the optimal pricing schedule for each of their communities.
The Prorize pricing was rolled out across all Holiday Retirement properties in August of 2014 and it will take a full year to fully validate the financial performance, but the initial trial suggests a step improvement in revenue collected. The one thing Sheila and Shamim pointed out was that their goal was revenue improvement and not just occupancy improvement. This means it is possible to have a somewhat higher vacancy factor but higher revenues. Another way to look at it would be that you could have with the right price essentially 100% occupancy and leave lots of money on the table. You could even go broke with 100% occupancy.
Better for the Sales Process
It can become very easy for sales people and prospects to get bogged down negotiating price. This means that the quality of lifestyle and the benefits of senior living for residents and their families get muddled by pricing negotiation. Almost by definition once the haggling starts, no matter where it ends up everyone is at least a little unhappy. Because pricing is something the sales people, local management and even regional management have no control over it comes off the table as a point of contention.
In the Holiday pricing schema each unit is individually priced based on the specific amenities of that particular unit. This means that two units with the same basic floor plan right next to each other might not have the same price. One is a little closer to the dining room; one has a slightly better view; one might have slightly nicer interior amenities; one might have newer carpet. This makes it much easier to explain pricing differentials to prospects.
A Closing Tool
Because the pricing tool is so flexible, it would be possible to update pricing every day. What Holiday does is reprice weekly. The repricing happens on the same day each week. When the sales process gets to pricing it is very easy for sales people to explain that Holiday uses a careful pricing model similar to what hotels use to determine the price of each individual unit and that pricing is updated each Monday (or whatever day of the week it is).
They then go on to explain that as of right now this unit is priced at X number of dollars per month and that will change next Monday when it could go up or could go down. A prospect can lock in the price for their unit by placing a deposit on the unit they have selected.
It turns out that because the pricing is based on data and is rational they actually have a higher level of comfort with their neighbors having different prices than they do, based on timing and amenities. It is actually much better than it looking like the pricing is somewhere between random and how good a negotiator your neighbor is.
Both Sheila and Shamim believe over time this kind of big data pricing will become the norm for both large and small senior living companies.